After reading this thread, I have decided to implement this solution in order to target multiple countries. In my case France and Luxembourg.
My website URL uses a gTLD such as www.example.com. The content is in French.
I have duplicated all pages and blog posts in a subfolder /lu and I have used the hreflang markup to indicate that the content is either in fr-lu or fr-fr.
In the Google WebMaster Tools, I have geo-targeted the /lu subfolder to Luxembourg. For the main domain I have not targeted any country.
After a few days, my website started ranking much better on google.lu than it used to be. It lasted a month or so, but today www.example.com/lu/ has lost dozens of positions for my keywords of interest. In fact www.example.com ranks #20 on google.lu and seems to have replaced www.example.com/lu/ which ranked #12 and is now nowhere to be found....
I have no idea why this happened. Like I said the content is indeed duplicated, but I have used hreflang to make it clear that I'm targeting a specific country.
What should I do ?